It takes hard work to drive anyone away from California's sunshine and scenic vistas, but politicians in Sacramento have been up to the task.

The latest Census Bureau data indicate that, in 2005, 239,416 more native-born Americans left the state than moved in. California is also on pace to lose domestic population (not counting immigrants) this year. The outmigration is such that the cost to rent a U-Haul trailer to move from Los Angeles to Boise, Idaho, is $2,090--or some eight times more than the cost of moving in the opposite direction.

What's gone wrong? A big part of the story is a tax and regulatory culture that treats the most productive businesses and workers as if they were ATMs. The cost to businesses of complying with California's rules, regulations and paperwork is more than twice as high as in other Western states.

But the worst growth killer may well be California's tax system. The business tax rate of 8.8% is the highest in the West, and its steeply "progressive" personal income tax has an effective top marginal rate of 10.3%, or second highest in the nation. CalTax, the state's taxpayer advocacy group, reports that the richest 10% of earners pay almost 75% of the entire income-tax revenue in the state, and most of these are small-business owners, i.e., the people who create jobs.

And things may soon get worse, thanks to Rob Reiner, who played the liberal "Meathead" on the "All in the Family" sitcom in the 1970s and now plays the same part in real life. He and his rich Hollywood friends have put an initiative on the state's June ballot that would add a 1.7-percentage-point income-tax surcharge on "millionaires" with income over $400,000, with the proceeds earmarked for universal pre-school.

In Tax Analysts v. Internal Revenue Service, No. 2005-0934 (D.C. DIst. Ct. 2/27/06), the U.S. District Court for the District of Columbia held that the IRS must make public all chief counsel advice, even that rendered in less than two hours.

Recent policy discussions have revealed increasingly heated debate about whether refundable tax credits are an appropriate part of the tax system. This article seeks to reframe this debate by setting aside distributional and administrative objectives and focusing instead on a relatively overlooked issue: the efficient form for tax incentives. Based on theoretical analysis and original empirical findings, it concludes that the arguments put forward by refundable credit opponents generally are unpersuasive on their own terms or fail to counter efficiency-based justifications for refundable credits. In particular, we argue that refundable credits are by default the most efficient way to structure tax incentives designed to encourage behavior generating positive externalities, absent clear evidence that the desired behavior or externalities vary by income class. The efficiency benefits of refundable credits are further magnified by their tendency to smooth household income and macroeconomic demand. In light of these findings, we conclude that serious consideration should be given to restructuring existing tax incentives, and designing new ones, as refundable tax credits.

This Article takes the controversial position that Treasury regulations are entitled to judicial deference under the Chevron doctrine, as clarified by the Supreme Court in the more recent Mead case, whether those regulations promulgated pursuant to specific authority delegated in a substantive provision of the Internal Revenue Code or in the exercise of general authority granted in Code § 7805(a). The Article attributes the unwillingness to concede Chevron’s applicability to tax exceptionalism, the erroneous perception of many scholars that tax is different than other areas of the law, which for the purpose of this Article translates into the idea that tax should have its own judicial deference standards separate from the Chevron/Mead regime. This Article reviews a century of jurisprudence and scholarship to show that what many tax scholars and practitioners believe is a unique tax deference tradition is, in fact, merely consistent with broader deference principles espoused by the courts and scholars throughout administrative law. Further, while many in the tax community believe that aspects of tax law and practice render Chevron deference inappropriate for most Treasury regulations, this Article contends that tax closely resembles other administrative law areas in which Chevron deference clearly applies. Finally, having established that the Chevron/Mead framework should apply in tax cases, this Article applies the standard articulated in Mead to demonstrate that Chevron is the appropriate evaluative standard for Treasury regulations and responds to arguments suggesting an alternative outcome.

Law has exhibited an unfortunate tendency to view associational interests in dichotomous terms, as either “everybody’s business” (and hence amenable to public law regulation) or as “nobody’s business” (and hence a matter of private prerogative). To be sure, there is plenty of debate about precisely where the line should be drawn, but the idea that such a line exists seems to go largely unquestioned. Property theory has contributed to this dichotomy by fostering a vision of property as an associational envelope that seals off a private inner sanctum into which people may enter at (and only at) the owner’s pleasure. As a result, property rights have often been viewed as an impediment to addressing associational problems, rather than as a prime candidate for solving those problems.

A lawyer who has an estate planning practice frequently advises his clients to get financial planning advice. Over the years, he has become very familiar with financial planning practices and he realizes that he could establish his own financial planning service that could provide such services to his clients and to the general public. Can the lawyer become a certified financial planner and sell financial planning services to his clients?

The first is to provide insightful or at least readable commentary on major developments in international and comparative taxation, a subject (especially the latter) which is largely undeveloped in American academia. I'll move from country to country, starting with some of the ones I'm more familiar with, and try to keep my readers informed about the developments in taxation and fiscal policy at each location....

The second purpose is to promote an academic discussion of antisemitism, racism, islamophobia and similar subjects in a way that cuts across the usual disciplinary lines....

Third and last, I will offer commentary on contemporary legal and public policy issues from a politically incorrect but not necessarily conservative position.

By my count, Mike is the seventh law school tax professor with a blog. Links to all tax blogs are maintained in the left column of permanent resources on TaxProf Blog.

This is a nerve-wracking time of year for law-school deans, as they await the results of what amounts to the Bowl Championship Series for their profession: On March 31, U.S. News & World Report will release its rankings of the top 100 law schools in the country. Most of the deans insist that these assessments are "inherently flawed" and "unreliable" -- and virtually all of them will sign an open letter to law-school applicants that says so.

But Daniel Polsby, the dean of the George Mason University School of Law, is different. His name will not appear on the forthcoming annual missive, and he's actually looking forward to the U.S. News survey. "We hope to move up a few places this year," he says. That would certainly be in keeping with a decade-long trend: Mason vaulted from 71st place in 1995 to 41st in 2005 -- an impressive achievement given that these rankings tend to remain static from year to year. Even more remarkable is that this fast-rising star in the law-school firmament possesses a faculty of professors who lean decidedly to the right....

To use a baseball metaphor, Manne was a scout who specialized in the minor leagues. Whereas his competitors were obsessed with signing big-name free agents in hot fields such as feminist legal theory, Manne quietly assembled a team of undervalued unknowns. "If the market discriminates against conservatives, then there should be good opportunities for hiring conservatives," says Polsby. This is exactly the sort of observation one would expect a market-savvy law-and-economics scholar to make. Manne and his successors were able to act on this theory, and though Mason has in recent years expanded its recruitment of non-economics specialists, it has stuck by the core observation that law schools routinely overlook raw talent. Associate professor Craig Lerner, for instance, studied under the political theorist Allan Bloom at the University of Chicago and worked for Kenneth Starr on the Whitewater investigation. Listing either of these experiences on a résumé might easily turn off a hiring committee dominated by liberals, which is to say a hiring committee at just about every other law school. And so Lerner turns out to be exactly the type of candidate that attracts GMU. "Have you read Moneyball?" asks Todd Zywicki, another one of Mason's bright young profs, in reference to the best-selling book by Michael Lewis on how the Oakland Athletics franchise assembled playoff-caliber teams on a limited budget. "We're the Oakland A's of the law-school world." [See Paul L. Caron & Rafael Gely, What Law Schools Can Learn from Billy Beane and the Oakland Athletics, 82 Tex. L. Rev. 1483 (2004).]

At the same time, the GMU law school has climbed the U.S. News rankings. Some years have been better than others: In 1999, as a result of poor data collection, there was a temporary but eye-popping dip to 113th. Slowly but surely, however, Mason has shed its status as a "safety" school for students who couldn't gain admission elsewhere. In 2001, it broke into the top 50 -- a group that U.S. News describes as "first tier" -- and it hasn't looked back. Since 2003, Mason has floated between 38th and 41st. It probably would do even better but for the particular ways U.S. News calculates worth: Forty percent of a school's ranking is based on reputation, as determined by judges and lawyers (15 percent) and law professors (25 percent). "If we had Dartmouth or Princeton's name," says Polsby, picking two well-regarded schools that don't have law programs, "we'd be a top-20 school overnight." And by weighing the opinions of law professors so heavily, U.S. News gives liberals a lot of influence; Mason almost certainly pays a price for the perception that conservatives aren't exactly an endangered species in its faculty lounge.

It doesn't take an advanced degree to nitpick the U.S. News survey -- or to imagine an alternative methodology that would benefit Mason. Brian Leiter, a professor at the University of Texas, has created several ranking systems that rely entirely on objective criteria. It might be said, for instance, that a school is only as good as its students. The 75th-percentile LSAT score of Mason's entering class in the fall of 2005 was 166 -- enough to tie it for 22nd best (with seven other schools). It might also be said that a school is only as good as its professors. To measure this, Leiter has created a "scholarly impact" rating based on faculty per capita citations in scholarly journals and books. On this scale, Mason ties for 23rd (with four other schools). Then there's the Social Science Research Network, which counts the number of times faculty papers are downloaded from the Internet; over the last twelve months, Mason professors rank eleventh....

Those who want to celebrate diversity ought to cheer for Mason, because it provides a much-needed dose of true diversity -- the intellectual type -- to the world of legal education. "I've always maintained that it's more important to have this diversity between law schools rather than within them," says Manne, who has watched the progress of GMU with pride from his semi-retirement in Florida. Todd Zywicki looks at it another way. "We have lots of intellectual diversity here," he says. "There are conservatives and there are libertarians." And things are looking up for all of them.

In Chief Counsel Memorandum 200608038 (2/24/06), the Associate Chief Counsel (Income Tax & Accounting) stated that an individual who is a registered domestic partner in California must report all of his or her income earned from the performance of his or her personal services, notwithstanding the enactment of the California Domestic Partner Rights and Responsibilities Act:

This Chief Counsel Advice responds to your request for assistance. Specifically, you have asked our office to address the manner in which the California Domestic Partner Rights and Responsibilities Act of 2003 is to be taken into account in computing the federal income tax of a registered domestic partner. In accordance with § 6110(k)(3), this advice may not be used or cited as precedent.

Issue: For tax year 2005, is a California individual who is a registered domestic partner, under the California Domestic Partner Rights and Responsibilities Act of 2003, required to include in gross income all of his or her earned income for 2005 or one-half of the combined income earned by the individual and his or her domestic partner?

Conclusion: An individual who is a registered domestic partner in California must report all of his or her income earned from the performance of his or her personal services.

The Internal Revenue Service recently audited the books of a Texas nonprofit group that was critical of campaign spending by former House majority leader Tom DeLay (R-Tex.) after receiving a request for the audit from one of DeLay's political allies in the House.

The lawmaker, House Ways and Means Committee member Sam Johnson (R-Tex.), was in turn responding to a complaint about the group, Texans for Public Justice, from Barnaby W. Zall, a Washington lawyer close to DeLay and his fundraising apparatus, according to IRS documents.

Lee Sheppard hit the nail squarely on the head recently when she observed that partnership tax specialists are accustomed to "doing anything they want -- and we do mean anything." [Lee Sheppard, NYSBA Considers Partnership Questions, 110 Tax Notes 448, 448 (Jan. 30, 2006), blogged here] In fact, subchapter K gives new meaning to the phrase "voluntary tax system." There is no greater evidence that partners pay taxes on their own very special terms than that embodied in the substantial economic effect test. Under that standard, partners can trade and deal in tax burdens and benefits in a manner that the Helvering v. Horst [311 U.S. 112 (1940)] Court would never condone. Horst makes it easy to conclude that a 50 percent owner of property is responsible for 50 percent of the tax benefits and burdens arising from property as soon as the corresponding economic benefits and burdens are realized. The substantial economic effect test contradicts Horst's teaching that income from property is taxable to the owner thereof. By allowing partnerships to divide tax benefits and burdens in a manner disproportionate to relative ownership, subchapter K turns Horst on its head. Why should that be the case? Why should we measure partnership tax benefits and burdens so differently from individuals or shareholders, and indeed in a manner that makes no economic sense? Let's look at the history of special allocations before articulating what has become a virtually meaningless, yet rote, justification for the current state of affairs.

Boston University will host an LL.M. program information session tonight at the law school (765 Commonwealth Avenue, Room 1540) from 5:30 - 6:30 p.m. The session provides an opportunity for those interested in earning an LL.M. degree, on either a part-time or a full-time basis, to learn about BU's Graduate Tax Program and Graduate Program in Banking & Financial Law.

Joe Bankman reports that there is a move afoot in the California legislature to repeal the ReadyReturn Program:

The Republicans in the CA legislator have now introduced legislation to kill the program entirely [No. 1335]. There is a Democratic bill that would expand the program to 1M taxpayers this year and up to 4M taxpayers in the future [No. 2905]. The bill would also pledge the FTB (state tax agency) to work toward giving all taxpayers access to the 3rd-party reporting of their wages, interest income, consulting income and so on. Taxpayers (or their preparers) could log in on-line before filing to see the income reported to the State and make sure their figures matched. The Republicans have already come out with a position paper on their bill. The Democrats, true to form, are late in their launch. Something should be out soon.

Vic's post was sparked by Ted Seto's comments at the UCLA tax colloquium last week on David Duff's paper (blogged here):

Fit and Justify is classic law review scholarship: you take your data points (usually judicial opinions, but sometimes statutes) and fit them into a model that explains what's going on. You might redefine old categories, or create a new category to account for an emerging trend. Scholars tend to recommend incremental policy changes. Larry Zelenak comes to mind as a master of the genre.

Normative-driven scholarship is where you start with a certain normative approach -- law and economics, behavioral law and economics, critical approaches, etc. -- and view the data through that lens. If the data doesn't fit, it's not because the author's normative approach is flawed, but rather because the producers of data (judges or legislators) are mistaken in their understanding of what the proper goals of the legal system are, which the author then proceeds to correct. So, for example, rather than accept the corporate income tax as an integral part of the system, scholars apply economics to reveal fallacies or to show how the system could be improved. Policy recommendations are often fundamental and sweeping. I find it interesting that many of the top SSRN tax authors -- e.g., Kaplow, Weisbach, McCaffery -- arguably fall into this category.

I wonder if the model we follow is dictated by our training. Those of us who come from law practice will tend towards fit-and-justify. Those of us with training in economics or other disciplines, or who self-identify as outsiders, will tend towards the normative models. As for explain-the-anomaly, perhaps it comes from reading too much Malcolm Gladwell and Steve Levitt.

Attorneys in the Division Counsel/Associate Chief Counsel, Criminal Tax, serve in over 30 offices located in cities across the country. The 70-plus Criminal Tax attorneys are responsible for advising and counseling the IRS Special Agents in Charge in all areas of the Criminal Tax function, including tax, currency and money laundering crimes and criminal procedure. They also provide legal counsel on investigative matters such as administrative and grand jury investigations, undercover operations, electronic surveillance, search warrants and forfeitures, the referral of cases to the Department of Justice for grand jury investigation, criminal prosecution, and the commencement of forfeitures. Criminal Tax attorneys also coordinate with other offices within the IRS and the Office of Chief Counsel on all matters involving Criminal Tax.

Major Duties: The Office of Chief Counsel, IRS seeks an attorney to fill a position in the Criminal Tax (CT) business unit. The Office of Chief Counsel, IRS serves as independent counsel to the IRS Commissioner and furnishes legal advice and representation, nationwide, on matters related to the administration and enforcement of Internal Revenue laws.

The methodology of the State Business Tax Climate Index is centered on the idea of tax competition, and each state’s final score depends on a comparison with the other 49 states. The overall index is composed of five specific indexes devoted to major features of a state’s tax system:

the state’s principal business tax, usually the corporate income tax

the individual income tax

the sales or gross receipts tax

the unemployment insurance tax

the state’s system for taxing assets, principally the property tax

These five component indexes are themselves composed of several sub-indexes, and a total of 123 variables are taken into account in each state’s tax system.

Tax reform is like Michelle Kwan, according to Senate Finance minority senior counsel Russ Sullivan, who spoke at the February 24 meeting in San Antonio of the USA branch of the International Fiscal Association. Analogizing to the American skater who failed to compete in Torino, Sullivan said that 2006 would be a year in which expectations from tax reform exceed results....

Sullivan's boss, Senate Finance Committee ranking minority member Max Baucus, D-Mont., has already pronounced tax reform "dead," so Sullivan was more polite. Tax reform is not on the 2006 agenda, and broad-based reform will not occur until someone runs for president on it and wins, like Ronald Reagan did. Well, what about the President's Advisory Panel on Federal Tax Reform? Sullivan commented that it was "not balanced" and did not engage with Congress. He said the Bush administration was "backpedaling" on some issues, and he wondered whether Treasury Secretary John Snow would even make recommendations this year.

First, he sold his residence to a "briber" for $1.5 million. After he discovered that he would not have sufficient cash to purchase a "monster" mansion that he wanted, he re-papered the sale of the home to reflect a sale price of $1.675 million. The home was only worth $975,000. Subsequently, after he was informed by his accountant that the profit on the sale, because it was in excess of $500,000, would generate tax at capital gains rates, he hit up the "briber" for another $115,100 to pay the tax. This payment was disguised as a "public relations and communications expense" and was payable to Cunningham's military memorabilia business. Of course, Cunningham got the tax results all wrong. The spread between $975,000 and $1.675 million was a bribe, as was the payment of the $115,100. Thus, Cunningham had ordinary income, subject to SECA, of $815,500. He had capital gain on the sale of the home on the difference between his basis and $975,000, although he would only have to recognize the gain to the extent that it exceeded $500,000.

As interim chief of a San Jose gay and lesbian community center, Clark Williams is accustomed to making waves. But one place he'd rather avoid that is on his tax forms. This year, a new California law might give him no choice.

For the first time, Williams and his partner -- and roughly 71,000 other Californians who have registered with the state as domestic partners -- face a unique quandary: When a new state law gives you many of the financial responsibilities of a married couple but federal law still treats you as single, what's the safe way to do your taxes?

"This is one time where I don't want to be a leader," said Williams, 40, who heads the Billy DeFrank Lesbian Gay Bisexual Transgender Community Center in San Jose. "I will follow the advice of professionals on this. I don't want to do anything to trigger an audit."

The problem is, professionals don't agree on what to do. And the Internal Revenue Service is still grappling with the issue, which is likely to have national ramifications. The thorniest issue centers on the basic question of how to report income on a federal tax return.

For example, if one partner earns $100,000 but a stay-at-home partner earns nothing, are they now entitled to report $50,000 of income on their individual returns? If the stay-home partner's $50,000 share isn't considered income, is it a taxable gift -- or something else? Domestic partners can't assume they'll be safe simply reporting income separately, the way they did before the state law took effect, some experts say. If the IRS decides to treat domestic partners more like married couples, some could find out later that they owe taxes because they weren't entitled to tax breaks they claimed.

"It's so bad that I don't know if I'd be able to file a return for these folks," said Kathleen Wright, a Bay Area tax attorney and professor at San Jose State University. She and others recommended filing for an extension, in hopes that the IRS will clarify the rules.

Michael J. McIntyre, a law professor at Wayne State University in Detroit, predicts the courts would shoot down income-splitting. That said, he thinks there's a strong enough argument to press the case. If the IRS rejects income-splitting, it's unclear how partners should treat money acquired as community property. Is it income? A gift?

"How could it be a gift if it's a part of state law?" asked tax attorney Donald H. Read, who practices in Berkeley and with Lakin Spears in Palo Alto. He notes that because the state law was retroactive, this issue also casts a cloud over everything from pay and investments to real estate and stock options that domestic partners have accumulated jointly since registering. Other gray areas abound. For instance, if partners own a home and pay the mortgage jointly, who may deduct mortgage interest? Could one partner's contributions to the mortgage be considered rent -- and therefore be taxable income for the other partner? "I can't think of anything offhand where it was this muddled," McIntyre said.

With the clock ticking down to the April 17 tax-filing deadline, tax experts worry that most of California's registered domestic partners are unaware what's at stake -- let alone how to complete their federal tax returns correctly. There has been little media attention on the issue. TurboTax, the top-selling software program, makes no mention of it. And tax preparers haven't seen or heard much about it either. As a result, tax experts advise registered partners to use heavy doses of caution and disclosure when they file their federal tax returns

The attached table shows capital gains tax rates, realizations, tax liabilities, and tax receipts since 1990....On the basis of CBO’s extrapolation of the available data for 2004, it appears that realizations increased by about 80 percent from 2002 to 2004.

CBO has updated its latest models with available data through 2004. Those models, which incorporate changes in the tax rate, fall well short of explaining the surge in realizations that occurred in 2004. Roughly half of the growth in realizations between 2003 and 2004 remains unexplained. After examining the historical record, including that for 2004, we cannot conclude that the unexplained increase is attributable to the change in capital gains tax rates. Volatility in gains can stem from other factors, such as changes in asset values, investor decisions, or broader economic trends.

The University of Saskatchewan has fired a tenured professor after determining that he had anonymously posted disparaging messages about fellow faculty members on RateMyProfessors.com.

Stephen Berman was a math professor at the university for more than 30 years. According to an independent arbitration panel, he maligned colleagues in postings to the Web site over a seven-month period during 2002 and 2003. The site is designed for students to share their views of their professors with other students.

We suggest a simplification of the tax code that levels the playing field for [exchange-traded funds] and ordinary funds. Taxation of distributed dividends continues. (It hits the shareholders of ETFs and ordinary funds in the same way.) But taxation of capital gains occurs only when fund shareholders redeem their shares. In other words, we suggest that mutual fund capital gains should be taxed in the same way as gains on other securities.

I began my career more than thirty years ago as a law clerk to Judge Theodore Tannenwald, Jr. of the U.S. Tax Court. From there I moved on to private practice at Arnold & Porter in Washington, D.C. I practiced tax and employee benefits at the firm and was an associate (1977-82) and a partner 1982-1991). With three children on the home front, I left the firm although I spent a couple of years continuing to work from home on several large continuing matters. My practice experience was diverse: international and domestic; transactional, controversy and legislative work. I also had the opportunity to do benefits work from both management and labor union perspectives. My pro bono time was generally spent training and then volunteering in our local court’s and federal district court’s earliest efforts at court-annexed alternative dispute resolution.

The U.S. Supreme Court has reversed the Fourth Circuit's ruling that, for purposes of determining diversity jurisdiction of the federal courts, a national bank is "located" in all states in which it has branches. Wachovia Bank v. Schmidt, No. 04- 1186 (U.S. Jan. 17, 2006). In your gut you know that the Fourth Circuit had to be wrong. What were they thinking? Why would the Supreme Court grant certiorari on such a narrow issue? And why do tax lawyers care? Are there state tax nexus implications here?

Peter Lattman's WSJ Law Blog reports that the ABC show The Bachelor is looking to cast "a great-looking, tall, successful, charismatic, 27-to-33-year-old, single lawyer. Though the network is unclear on the exact timing of the show, it will reportedly be filmed in yet-to-be-named exotic, tropical location."

Tax protester and author Irwin Schiff was sentenced yesterday to 13 years in federal prison for advising people that no U.S. law requires them to pay income tax. From the AP story:

Schiff, 78, accused the government of trying to suppress the truth, while his lawyer argued he was mentally ill. Schiff's earlier boast from the witness stand that he had helped thousands of followers avoid paying $2 billion in taxes was used against him at sentencing. ''Thousands of tax returns, millions and maybe billions of dollars lost,'' U.S. District Judge Kent Dawson said as he branded Schiff and his Las Vegas company, Freedom Books, ''a flimflam operation'' that encouraged others to evade taxes. ''He took their money and left them holding the bag,'' the judge said. The judge also ordered Schiff to pay more than $4.2 million in restitution....

Schiff remained defiant on Friday, declaring: ''There is no law that required me to pay the tax.'' His lawyer, Michael Nash, promised an appeal. Nash said experts diagnosed Schiff with suicidal depression, bipolar mental disorder, paranoia and delusions that made him believe paying taxes was voluntary.

Tax Analysts reports: "Schiff, who cited Socrates, Gandhi, and Nelson Mandela as other leaders who found themselves on the wrong side of the law, accused the courts and the IRS of misinterpreting the income tax rules and abridging his due process rights. He declined to yield to existing case law, insisting that his perception of the law has never been debunked."

Schiff's former girlfriend was sentenced to five years in federal prison for advising people that there was no federal law requiring them to pay income tax. From the AP story:

Cynthia Neun, 52, also was ordered to pay $1.1 million in restitution and faces years' worth of back taxes, interest and penalties. Prosecutors cast Neun as a key administrator of Schiff's Las Vegas business, Freedom Books, which advised clients that they did not have to pay federal income taxes and that the Internal Revenue Service has no legal authority to collect them. Prosecutors estimate that the fraud cost the government as much as $57 million since 1999.

The Tax Court's recognition of the body as a valuable commodity, when combined with other well-settled principles of the tax law, carries with it a variety of unsettling implications. More specifically, a literal application of the law as it now stands would suggest the absurd possibility that an organ donation, whether during life or upon death, could actually generate an additional income, gift, or estate tax liability.

From the perspective of the income tax, this portent is found in living kidney donations effected through a paired exchange program .... These programs match mixed pairs of willing donors and recipients as a means of facilitating the exchange of kidneys between persons who, because of incompatible blood or tissue type, cannot make a donation directly to a relative or friend.

By definition, these transactions entail a quid pro quo: the exchange of one kidney for another. It is this "bargain" element that gives rise to the bizarre prospect that they would implicate the income tax. This possibility derives from the axiom that, in the absence of an express statutory exception, an exchange of one item of property for another is a taxable event.

When strictly applied, the literal terms of the law would draw no reliable distinction between a taxpayer who engages in the noble and uncommon act of donating a kidney via a paired exchange and one who participates in a routine commercial endeavor involving a more widely-traded commodity. As noted above, for example, the Tax Court has found that income derived from the sale of blood plasma is conceptually the same as that generated by the sale of any other product, without regard to "the traditional sanctity of the human body." Thus, without regard to our notion of the body as something of an aberration when employed as the object of commerce, it is arguable that an exchange involving a kidney would be treated the same for tax purposes as any other bargain. Accordingly, gain or loss on the exchange would be measured by the difference between the fair market value of the consideration received by the taxpayer in the exchange and the basis of the property he gave up (generally, the cost incurred when he acquired it). The consideration given in a paired kidney exchange takes the form of a kidney. The taxable income generated by the exchange, therefore, would represent the excess of the fair market value of the kidney received over the cost or other basis of the kidney transferred.

The Treasury regulations describe the question of fair market value as being one of fact, and the courts have construed the concept in the familiar parlance of "the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell." Admittedly, the concept of value is perplexing when considered in the specific context of an essential bodily organ. The very idea that a "willing" buyer could act without "compulsion" in a contract involving the exchange of a life-giving thing is an anomaly of thought. Yet, this fundamental problem aside, the mere fact that the law precludes the existence of a legitimate market in which buyers and sellers may trade in these "goods" does not alone render them without value, as the market in illicit drugs so readily attests. To the contrary, the media regularly broadcasts troubling and bizarre tales of the illegal organ trade. Moreover, Medicare regularly "procures" organs, such as kidneys, at a cost measured in money. Thus, even though the "value" of a kidney might be a vague abstraction in most minds, it is, for tax purposes, arguably determinable in some manner with reference to these alternative sources of supply. The concept of basis, or the "cost" element of the gain or loss equation, is equally obscure in the realm of the body and its constituent parts. Because we do not purchase our bodies or otherwise acquire them in a transaction from which we can derive any identifiable cost, it would appear that we have a basis of zero in these, our most physical of assets. Accordingly, a participant in a living kidney exchange would realize income in an amount equal to the full value of the organ received, which could be significant.

The president of Lakehead University, in Ontario, says that he will not allow the institution to deploy a wireless network on the campus out of concern that the electromagnetic frequencies such systems emit could endanger students' health.

The president, Frederick F. Gilbert, became concerned about the health effects of wireless networks after reading studies done by scientists for the California Public Utilities Commission, said Marla Tomlinson, a spokeswoman at Lakehead, a 7,000-student institution in Thunder Bay, Ontario. The California scientists concluded that people exposed to electromagnetic wavelengths might be at risk of developing cancer and recommended further investigation.

In granting certiorari in the case of DaimlerChrysler Corp. v. Cuno, the Supreme Court asked the parties to brief whether respondents have standing to challenge Ohio's investment tax credit. This report applies modern standing doctrine to the Cuno case and concludes that the Cuno plaintiffs do not have standing to raise their claims in federal court. Moreover, the authors write, allowing the Cuno plaintiffs' case to be resolved in federal court would open the federal court system to a wide range of taxpayer challenges better left to the political branches of government. Nevertheless, they recognize that there may be other litigants that would have standing to challenge Ohio's investment tax credit in federal court.

Scholarship and research reporting in the sciences and medicine has, in the last few years, been shifting to an open access approach. The combined power of the web, universal document formats (e.g., Adobe’s Public Document Format), and powerful search technology (e.g., Google), has fueled a dramatic expansion in this open access approach in just the last four years. The result is that the global interested public can find and use scholarship at a far lower cost, to a far greater degree, than ever before. Interestingly, the open access publishing model has not yet become as popular in legal scholarship as in other fields. Why has legal scholarship lagged in the open access publishing movement? Should law schools, who do the most to fund both the production and publication of legal scholarship, push toward an open access publishing approach? The papers presented will be published, under open access principles, in the Lewis & Clark Law Review.

The IRS today released a report on its examination of political activity by tax-exempt organizations during the 2004 election campaign and unveiled new procedures for the 2006 election season to provide guidance on political activities by charities.

The IRS began the review following an increase in complaints about political activities during the 2004 election cycle. To ensure fairness and impartiality, the issues examined stretched across the political spectrum. Further, IRS career civil servants handled the cases without regard to political affiliation. Nearly three-quarters of 82 examinations completed to date have concluded that the tax-exempt organizations, including churches, engaged in some level of prohibited political activity. Most of these exams concerned one-time, isolated occurrences of prohibited campaign activity, which the IRS addressed through written advisories to the organizations. In three cases – involving tax-exempt organizations that were not churches – the prohibited activity was egregious enough to warrant the IRS proposing the revocation of the organizations’ tax-exempt status. The recent examinations resulted from specific referrals and covered only a small segment of the tax-exempt community, which includes more than 1 million tax-exempt 501 (c)(3) organizations in the U.S.

Some of the specific instances of political intervention alleged and examined include the following:

Charities, including churches, distributing diverse printed materials that encouraged their members to vote for a particular candidate (24 alleged; 9 determined)

Religious leaders using the pulpit to endorse or oppose a particular candidate (19 alleged; 12 determined)

Charities, including churches, endorsing or opposing a candidate on their website or through links to another website (15 alleged; 7 determined)

Charities, including churches, making cash contributions to a candidate’s political campaign (7 alleged; 5 determined)

Today’s report covered the 2004 election cycle, beginning on July 30, 2004 and running through Nov. 30, 2004. In this initiative, the IRS contacted 110 tax-exempt organizations – many of them churches – and found some violation of the prohibition on political activity in 59 of the 82 cases closed-to-date. The cases covered the full spectrum of political viewpoints.

The report outlines new procedures for the 2006 election period that will ensure that all referrals the IRS receives from the public, as well as activity the IRS itself uncovers, are reviewed expeditiously, and treated consistently and fairly. These procedures reaffirm the agency’s commitment that all examination and investigation decisions are made in a nonpartisan manner.

As a part of its approach to combating this activity, the IRS has also begun its educational and enforcement efforts to help ensure that charities have enough advance notice of the statutory rules against engaging in political activities.

The IRS is releasing a new fact sheet that provides information to help 501(c)(3) organizations stay in compliance with the federal tax law. The fact sheet provides detailed examples of the types of activities the IRS investigated during the 2004 election cycle. The examples and related commentary are intended to help tax-exempt organizations, including churches, better understand what activity constitutes prohibited political intervention.

Deutsche Bank is in talks with the Justice Department in an effort to settle a criminal investigation over the bank's role in questionable tax shelters, people briefed on the case say. This month, a smaller German rival, the HVB Group, reached a nearly $30 million agreement with prosecutors while acknowledging "criminal wrongdoing" in helping to carry out fraudulent tax shelter transactions. [blogged here]

For Deutsche Bank, the path toward a settlement may be rockier, in part because it had a much larger role in the creation of some questionable tax shelters and the transactions underpinning them, investigators have said. A potentially larger obstacle, say the people briefed on the case, is that Deutsche Bank appears unable to account for a number of those transactions....

The investigation of Deutsche Bank is the second major prong of a rapidly widening investigation into the accounting firms, law firms, banks and investment firms that worked together to sell sham shelters in recent years. Last August, KPMG, one of the nation's largest accounting firms, avoided a criminal indictment over four questionable shelters by reaching a $456 million deferred-prosecution deal with federal prosecutors in Manhattan.

A 2003 report by the Senate Permanent Subcommittee on Investigations [blogged here] directly quoted a March 2000 internal e-mail message from Jeffrey Eischeid, then a senior KPMG tax partner, in which Mr. Eischeid wrote that he could not describe Deutsche Bank's loans to investors for blips as "consistent with industry standards." Mr. Eischeid is one of 17 former KPMG employees who have been indicted on charges of defrauding the Internal Revenue Service. Their trial is scheduled to start in September. According to the Senate report, Deutsche Bank participated in 56 blips transactions in 1999 with KPMG and Presidio Advisors, an investment firm that the government contends in court filings is a promoter of abusive tax shelters. For the shelters, the bank provided loans to KPMG clients totaling $7.8 billion. It earned fees of $44 million for the loans and trades in the shelters.

President George W. Bush's proposal to expand health savings accounts, intended to help contain spiraling medical costs, may prove a tax-free boon for the nation's rich.

Both supporters and opponents of the proposal said the enhanced HSAs offer unprecedented tax advantages and may become more attractive than 401(k)s or Individual Retirement Accounts as a way for the richest and healthiest Americans to build savings.

The proposal would create "the mother of all tax shelters," said Paul Caron, a professor at the University of Cincinnati College of Law.

As part of its ongoing work to remediate control weaknesses in its corporate tax function, the company said that it will restate its results for fiscal years 2005 and 2004, as well as previously reported quarterly results for fiscal 2006. The restatement pertains principally to errors in determining the company’s state effective income tax rate, resulting in a cumulative understatement of its state income tax liability of approximately $32 million as of April 30, 2005. The company estimates that the restatement will result in a 7-cent decrease in earnings per share in fiscal 2005 and a 2-cent decrease in earnings per share in fiscal 2004.

Nice to see a company live up to its promise: "[W]e ensure that you will benefit from every deduction and credit available to you. If you don't get the maximum refund you're entitled to on your taxes, then your tax preparation is FREE. This is our Maximum Refund Guarantee." The media has poked fun at the world's leading tax preparation firm messing up its own taxes:

Robert Willens (Managing Director, Lehman Brothers, New York) has published "Sanitizing" Tainted Shares in a Spinoff, 110 Tax Notes 899 (Feb. 20, 2006), also available on the Tax Analysts web site as Doc 2006-1761, 2006 TNT 35-40. The article explains how to sanitize so-called tainted shares of stock in a subsidiary that is spun off in what is designed to be a tax-free transaction.

Boone Pickens, the often controversial and always colorful Texas oilman turned investor, took advantage of a temporary tax break to make a gift that propelled him into the ranks of the nation's top philanthropists last year. But what Mr. Pickens gave away with one hand he continues to control with the other. At the end of the year, he gave $165 million to a tiny charity set up to benefit the golf program at Oklahoma State University, reaping Mr. Pickens a tax deduction. Records show that the money spent less than an hour on Dec. 30 in the account of the university's charity, OSU Cowboy Golf Inc., before it was invested in a hedge fund controlled by Mr. Pickens, BP Capital Management....

"Sadly, it's another case of rich man manipulating charity for his own benefit," said Marcus Owens, a lawyer who formerly headed the division of the I.R.S. that oversees tax-exempt groups....

To some, the question is whether a wealthy person should get a tax break now for money that has essentially not yet been put to charitable use. By giving the money before 2005 expired, Mr. Pickens was able to take advantage of a provision in Hurricane Katrina relief legislation that allowed him a deduction for a charitable gift equal to 100& of his AGI, double the normal limit of 50%....

The 16th Annual Conference for Law School Computing will be held Thursday, June 15 through Saturday June 17 at the Nova Southeastern University Shepard Broad Law Center. The title of this year's conference is "Rip, Mix, Learn." CALI has issued a Call for Speakers to law faculty, librarians, and IT staff with experience using, installing, supporting, or building IT-based systems. I am on the CALI board and attended my first annual CALI conference last summer on Open Source, Open Law, Open Education at Chicago-Kent, and it was superb. If you are involved at all with law school technology, I encourage you to attend this year's conference.

Ranking law reviews is not a novel initiative. Data regarding the relative value of legal periodicals was first published in 1930, in an article primarily concerned with the overall contribution of legal periodicals to the development of positive law. Since then many attempts have been made to rank American law reviews by various criteria.

This Article, however, focuses not on actual rankings but on ranking theory and methodology. It offers an introductory discussion of the goals of law review rating, and the essential attributes of reliable and beneficial ranking methods, followed by a systematic and comprehensive analysis of the advantages and shortcomings of the various methods that can be used to assess the relative value of American law reviews.